tv Worldwide Exchange CNBC February 14, 2013 4:00am-5:59am EST
>> fourth quarter data for germany and france comes in below expectations. >> and japan's recession drags on. the boj shrinks for a tlird quarter. this year will be as challenging as 2012 after seeing sales growth less than expected in the fourth quarter. the ceo tells cnbc, europe remains a drag. >> europe is depressed. it's going to take time. to solve it in part of europe is hard hit as it's going to take longer. >> and a mega merger is cleared for takeoff. reports say the boards at amr and us airways sign off on their $11 billion deal to create the world's biggest airline. >> announcer: you're watching "worldwide exchange," bringing you business news from around the world. >> all right.
you're wearing an appropriate valentine's day shirt. >> i am. i tried. there's a little bit of pink if we look at your tie very closely. if you want to know what's happening in the markets today, hold on, ubs, the valentine's day gdp's massacre. >> yes. >> because if you look at when it's japan shrinking at an annualized rate, germany coming in on quarter on quarter, france coming in -- well, we know they had a recession earlier in the year, as well. minus 0.9% on the quarter been minus 2.7 on the year. >> oh, that's brutal. >> it's the sixth consecutive contraction and that match tess recession of 1992 to 1993. the minus 0.9, it was forecast at minus 0.6 is the slash gdp. >> and italy has been down 2.7% on the year, but this is something in the range of almost
a 4% annualized drop until the year from a year earlier. >> the massacre continues, basically. we're going to get the consolidated figures out in a few hours' time. >> 25%. >> if you look at bourses gener generally, even its growth is coming in we can been. >> not bad company reports, though, right? that's the share of the gdp as it is. >> euro/dollar is just over 1.34. what is woiring is net exports, of course. >> germany's powerhouse. it's interesting, we've seen at morgan stanley, spain will allegedly be the new germany. we're going to ask one of his colleagues about those comments. just why he thinks it might be export in spain now that helps bail that country out.
>> meanwhile, happy valentine's day. we'll be out to a highend forest to hear how big a day it is. >> and we'll head out to nestle. >> and we'll be back in moscow in the run up to this weekend's key meeting. >> and we'll get a sue from seoul as the bank of korea says the boj's expansionary policy posts uncertainties to the economy. >> italy is trading lower today but warned of a challenging 2013 to come. cherylin is at the nestle headquarters and joins us for more. i hb carolin. >> thank you, ross. you've got sales increasing by 2.2% to 92 billion swiss francs. net profit slightly lower than forecast, 8.6 billion swiss
francs. that's the organic growth figure. now, investors have been incredibly spoiled over the last couple of years because necessarily's organic growth has been better than its own guidance. now, this year, at least for 2012, we're seeing the slowest growth in three years of only 579%. still at the upper end of its consumer guidance. and some of that has reversed in the fourth quarter. now, i did get the chance to speak to the ceo of this business. and here is how he felt about the performance in 2012. >> we did with our commitment. the performance that is building up on the good performance in
the last year. so it's performance on performance. so, yes, i feel that the team has done a good job. >> to what extent have they been reversed in the fourth quarter? >> well, there was some national disasters, but these happen always. in other words, you saw what should be the growth picking up a little bit in the fourth quarter. all in all, it is a slow growth. >> but still, it is slowest annual growth in about three years. to what extent is the consumer in the emerging markets still healthy enough to drive forward with your growth? >> well, the emerging markets, growth as the momentum got the news. also, the pricing has come down.
what we see is actually volume growth coming back, which is what drives the solid base of organic growth. >> before we come to pricing, i want to get a better idea of how much visibility you have for 2013. talk me through the outlook for the consumer confidence in the u.s., europe and in the emerging markets. >> these are three different dimensions in the world. europe is depressed. it's going to take time, it's going to take years. you have two dimensions, europe is hard hit andite going to take longer. and europe is reflecting that with very, very low single digits. but we had growth in europe. and that comes through innovation. so we stell on opportunities that we see, identify and organize around. north america, we see some colors coming back in the consumer confidence.
so we are confident that that is going to drive accelerated growth in the future. it was expected. and each with their different -- and there's not a constant written, but all in all, the world is growing and we want to be part of that. >> you mentioned before that volumes are growing more than prices. with pressure on volumes, do you feel like you're not going to be able to increase prices by as much as you have done in the past? >> well, there's no objective, per se, to increase prices. you do that when you have raw material costs going up, then we have many rays of regionalizing these ingredients. but sometimes you have to increase prices. that is flattening out now. they're on a sustainable level. we don't expect that volt
volatility. in other words, less volatility than prices. >> that was paul, the necessarily ceo speaking to me either. not a lot of headway on pricing, either. for 2013, the company says it looks to be every bit as challenging as 2012. but it's still quite confident that it can outperform the market in 2013 and once again guiding for 5% organic growth and an improvement in major yens. >> did you make any comments about the swiss franc or talk about what we saw this week about more capital controls to help fight the strong property market there? >> look, kelly, whenever i talk to mr. volka about currency, he says we're naturallily hedged. that's our reporting currency. what they work with is local currencies and given that it is the biggest food producer in the world, they work with so many local producers so what they
care about is the fluctuation of local currencies and they at the tell me that that is very, very well hedged. to the viewers out there, make sure you tune into the second half of this interview coming up in one hour's time and then you'll see what i g got as my first valentine present of the day. >> carolin, you didn't give up chocolate for lent, did you? >> no, no. welling nestle all day, how can you? >> no, just unfortunate timing. >> i gave up chocolate. i'm glad that i'm not down at nestle. but we were wondering if white chocolate counts as chocolate. and it appears that it doesn't, that it's made of sugar and flour. what a relief.
bnp shares are moving higher this morning after the french bank launched a $2 billion euro cost savings plan. the group posted a 33% drop in fourth quarter profit. stephane is in paris. stephane, what can you tell us? >> this is where being a reporter in paris is less interesting than being -- because i didn't have any chocolate from bnp for valentine's. nonetheless, the company reported weaker than expected earnings trt fourth quarter. but that's the only disappointment we had from bnp. if you look at the quarter figures, they were much stronger than what we saw at societe generale. and 6.5 billion euros for the full year despite economic conditions in europe. the cost of risk was 42% lower last year. if you exclude the impact on
greece in 2011, the cost of risks would have increased by nearly 10%. >> the decline is basically linked to the flight that 2011, we used to have those permanent in the greek debt. we believe that considering the general economic outlook, there might be some additional increase in costs as we enter 2012. >> bnp is on the bank with the highest ratio in france and probably the highest in europe. under basel 3, that was much higher than the target of bnp paribas. the bank announced a cost savings plan aiming to reduce its cost debate by approximately 2 billion euros by 2015.
and it will extend where the growth is at the moment, which means more expansion in asia why. it's what the ceo told us in this interview at bnp paribas. the market reaction is positive. the stock is up 3.2%, much more positive than what we've seen yesterday. kelly, thanks fof sure. thank you very much. >> valentine's day is unusually early this year. although, it was difficult to walk around yesterday with ashes on because you go to mass and you get the ashes and it's a catholic thing. >> did you use sack clothe, as well. meanwhile, italian police have arrested the former monte
more "likes." more tweets. so, beginning today, my son brock and his whole team will be our new senior social media strategists. any questions? since we make radiator valves wouldn't it be better if we just let fedex help us to expand to new markets? hmm gotta admit that's better than a few "likes." i don't have the door code. who's that? he won a contest online to be ceo for the day. how am i supposed to run a business here without an office?! [ male announcer ] fast, reliable deliveries worldwide. fedex.
despite the economics, of course, the nikkei has done extraordinarily well from the kwourth quarter and into the beginning of this year based on expectations for policy. is the run over done? >> no, i don't think so. i think there is still some room that will be more -- as soon as april kicks in with a new fiscal year, with the possible lifting up of the minimum wage, which i think will have a positive effect at least short-term in domestic consumption. which should be good news. of course, we will all look at what we'll offer during the weekend and if japan will be allowed to keep on its valuation process of the yen. but overall, i think there is still some room for growth for the nikkei. >> marco, who will be the next
boj governor? >> tough questions. i think my answer can be as wrong as yours, kelly. >> who is on the short list and what does it mean for markets? >> i think the names that are on the short list range from academics, from former people of moyf, there is the former boj deputy in the list. it will be probably not as -- a leader figure, but they will try to create a sort of consensus panel that will drive boj according to economics. which in the long-term might be trouble for the japanese economy. >> marco, the yen, down, as you say, 17% against the dollar since september. how much further can it go? where is the resistance levels? >> i think there is a significant resistance level to
95. the point is, it's now more sort of the political game more than anything else. the japanese economy needs badly to kick start the domestic consumption. of course, export led benefits that can come through weaker yen are very welcome. but the biggest challenge is, really, to kick start domestic consumption, especially having in mind that the super sense inflation target that boj will prosecute. >> and it looks like markets are expecting the boj to buy on the london engine, but what about buying overseas? we've seen them indicate support for the esm or maybe looking at peripheral european sovereign debt which interestingly enough, europe is probably appreciative of the fact that someone is
buying into the industry. but nevertheless, how aggressive might japan be about buying outside its shores in order to help weaken the yen? >> again, this is probably something that will get a clear picture after the -- will have his first meeting with the boj in march. i agree with you, there tends to be a more aggressive move towards european assets. having said so, i do not know if we will see drastic moves on interest rates overall. let's not forget on the debt side of the japan that most of the debt is in the hands of domestic investors that usually have less demand to increase interest rates for the environment suggest so. >> okay.
marco -- >> so at the end of the day, i don't see increase of interest expense drastic for japan in the medium term. >> right, right. well, that's the worry to some extent. but anyway, marco bardelli joining us from singapore. meanwhile, the bank of hong kong did keep its benchmark rate steady overnight. still, suggestions about concerns over stimulus policies gives us some surprise. chery, what exactly did the bank of korea say about japan? >> although the bank of korea governor did not name japan and tried to stay diplomatic in the press conference today, he did say there are down side risks to the korean economy like a possible fiscal tightening by many countries and the issue of a foreign exchange rate.
japan's aggressive monetary easing drive can take toll on korea's exports as they account for about half of the economy. and this on top of the recently weaker yen and the strengthening yuan that has hurt investor sentiment here on the kospi, particularly in the auto space. according to the research institute for the woman, the value of korea's total exports will decline by 0.9% when the yen/won rate falls by 1%. meanwhile, on the home turf, analyst res divided by the bank of korea's next move. some analysts say the new administration here in south korea will likely turn to a fiscal measure rather than a monetary one while others point to the bank of korea's cut to 2013 growth forecast in january and the fact that decisions this month and last month to hold the rate was not unanimous. guys, back to you.
>> thanks very much for that. to mark the most romantic day of the year -- >> which day is that? >> today. >> we're taking a look at cupid's influence over the corporate world. many others headed for divorce from the start. most famously, till fated tie up between time warner and aol. we want to hear from you, which corporate marriages are meant to last? which tie-ups do you think are on the rocks or take a turn at matchmaker and tell us if you see any couples who are head to the altar. and we are talking about companies here. >> not just peugeot and gm in europe. >> is that your proposal there? >> no. that was one of the potential marriages we were talking about yesterday. >> that's right. >> european owners in persia,
should they be entering some kind of relationship? >> and amr and asia are determining their relationship. still to come, there's ongoing weakness across europe. we'll take a look at the good, the bad and the ugly. plus, could spain really become the next germany? we'll ask about that and why they're predicting a bold reversal of fortune.
the euro takes a hit. >> japan's recession drags on as gdp shrinks for a third straight quarter. >> nestle shares fall after the food giant warns this year will be as challenging as 2012 after sales grow less than expected in the fourth quarter. >> europe is depressed. you have two commissions in europe. part of europe is really hard hit and it's going to take longer. and a tie-up on valentine's
d day, amr and us airways sign off the on the world's biggest deal to become one airline. so the german economy shrunk by 6% in the forty quarter. it's the weakest performance since 2009. a composite gdp figure is due in around 30 minutes' time. danielle, a very good morning to you. we saw downgrades from france earlier last year, as well. the italian figures coming in worse than expected. and yet your people have latched on to the recent pmi and ifo numbers out of germany suggesting that we're through the worst of it. what are we to make of these flash numbers? >> well, of course, it is not a matter of a romance in this gdp
number, but at the fourth quarter, it is true that all the large economies from germany and france to italy and spain are slinging and in some cases an accelerated pace. but this is mostly a look back with new survey data in the fourth quarter was going to be weak and that data had confirmed that. now the sentiment indicators for the beginning of the year are a little more constructive. then falling to a cap in growth but to a lesser pace of economic contraction. our petition is that the eurozone economy as a whole is likely to stabilize towards the middle of this year and that we expect just a muted recovery thereafter. >> yes. italy has six consecutive quarters. spain, these in some way seem to -- you know, we know they were going to be weak. if their economies don't turn around, can we maintain these lower bond yields?
>> well, ross, i think southern europe, of course, will take more time to recover. italy has been six contractions in a row. that's the longest period of recession in 20 years. the last time we had six quarters of a reseg was in 1992/'93 when italy had to leave the mechanism. so there is a degree of further economic weakness in the -- of the eurozone. i think it's one of the biggest risks. and saying this because if they don't strengthen their economic fabric and rather quickly, then the next shock which might come from a number of angles could be a stronger currency, could be a strong and high price of oil, could be also domestic policy mistake on the fiscal side if the country is not strong enough to cushion and with stand this shock, then the recession might accelerate, as well.
>> and the bulls would perhaps suggest that this might have been the least optimal way of doing so, but it has been a side effect of all the austerity and all the recessionary pain. does that leave spain, greece relatively better positioned now than a couple of years earlier? and to the point, is spain potentially the next germany when it comes to being able to use export led growth cheap labor? that's a deal i believe your team has put forth. >> yes. this is a point we have been making for quite a while, actually. a number of concretes and spain is the first main example of a recovery in the last competitiveness grouped. and not entirely, but because of the recession, and also because of the reform union labor costs are decelerating and now coming down. that is quite important, especially for spain because it will improve and france has exports poor performance.
the spanish economy has been the third strongest supporter since the recession a year ago and after germany and ireland regardless of what the currency did or didn't do. and if you consider the domestic demand like we are seeing is likely to stay weak for an extended period of time, that is the best hope for the spanish economy to rebalance a way for domestic demand and construction and towards exports. so they should become a little more like germany and we hope germany will become a little more like spain with stronger domestic demand prior to the crisis. .it's a theme that can have important regulations as a whole. >> exchange rates can't really be used as a method of adjustment here. what does that mean for germany with the kind of changes you're talking about? does that point to a stronger or weaker euro? >> well, i think that those countries are recovering competitiveness of the hard way
through an adjustment of the real economy. the key point is that just like spain is to become more export oriented, germany, through likely stronger inflation which might benefit wages in the public sector, in the private sector, that may benefit a pension and also the housing market, the hope is that we start consuming a little more. that will lead to a rebalancing overall. we expect the currency to start shading a little over the next coming months. >> we'll leave it there. thanks. spain needs to be more like germany and germany more like shape. we'll see how that goes down. daniella, thanks very much for that this morning. meanwhile, the world's central bankers have been standing along, volatility at the g-20 summit in moscow. steve is there and he joins us for more. mr. soros making big betts again
the yen, steve. >> isn't it wonderful when you get these grandese of the market trading who made so much money over the years, lecturing the central bankers, sovereign ministers and says what they should or shouldn't be doing in terms of how to run interest rates and indeed a broader monetary policy. i want to bring this back to the real world, as well, and look at the investment sort of things. we have a parallel b-20 meeting, as well, looking at real world investments surrounding those issues and indeed those currency war issues. and to bring this into focus, as well, i'm delighted to say the ceo of the russian direct investment fund has joined us to discuss some of the key points, as well. thank you very much indeed for joining us the.fist, let's get the clarification out of the way. i have copy some copy saying you're the kremlin's private equity arm. you dispute that, don't you? >> the government did provide us with up to $10 billion a year.
but we have set up a surprise with high return and project the capital into the economy. on our advisory board, we have some of the key parts of the investment community. this is for higher return investing to make sure we invest things with good returns. >> the kremlin and russia is having a big privatization program, and you, on the other hand, are buying into some of these privatizations. how does that work, sir? >> we have focused on bringing top investors with us. we brought china investment corporation to invest in several transactions. last year 1.5 billion came from investors. so our approach is invest a little bit of money, but have investors since the walls come and invest in russia so it's all
about increasing the partnership of foreign investors and of private investors in the foreign economy. >> we had the ipo going on at the moment, as well. you are a stakeholder in that, as well. can you tell us what the intentions are regarding that ipo? >> well, we're big deliverers in my business. we're a shareholder. we would like to increase our stake in the business and we would like to continue bringing investors with us. we already brought quite a few investors into the company. the ipo will be happening tonight. we have big delivery of the business because it's a monopoly stock exchange in russia. president putin mentioned that most of the exchange will happen with the schangz. >> and so you can't tell us exactly what you're doing until we find out tomorrow, but there is a good chance you want to increase your exposure. >> yes, that's correct. >> you wrote back in 2008 five rules for getting over this
financial crisis. i got stuck on the first one and it says this is going to be a long time. and it certainly has. how much longer do i think it will be? >> we believe it will take three, four, five more years for things to get into shape. to stimulate growth, you need to have investment and some of the themes they're discussing at the g-20 is how do we get much more investment into infrastructure and other things to stimulate growth? so we believe the countries back together. we will see a recovery in three to five years. >> one of your other points is talking about globalization. that has been destroyed in the last couple of days. what's going on here, as well. do you think that cooperation is actually at a very low ebb and that could affect the g-20 meeting? >> yeah. i believe that the concept of cross border investment could be glue. the tril lai links lots of companies together. it's very difficult to have argue that you need to have growth and investment is fundamental for that.
we were discussing some of the leads in investment funds this morning. how do we create better practice and much better? so countries have to figure this out. >> i'm also asking every single russian i meet about the image problem russia appears to have in the west, as well. we were showing me some of the statistics. i want to paraphrase what's positive about russia. >> yeah. for example, we look back over the last five years, the stock market increased since the last 12 years. the banking system increased by more than 26 times. so we have decree growth of people sort of forget when they think about russia. and in doubles, we launched the program invest in russia. we basically want people to understand russia equals growth.
>> it was a real pleasure speaking to you. we're going to leave it there. when it's finished, it will have around $10 billion of funds to invest in those high growth areas. >> thank you very much. plenty more to come from moscow and the g-20 meeting. >> lots of rhetoric about the yuan, whether it's using monetary policy as a tool rather than direct intervention? >> or what george soros has been saying. he's allegedly made nearly $1 billion shorting the japanese economy since november. also making money transacting on that. the yen has fallen around 17% against the dollar since the beginning of november. >> november. so if you had gotten basically into this trade when you saw
that change of leadership during the election or in the aftermath, then you would have done quite well. >> he's gone short yen, long nikkei. because the nikkei is up by even 340r than the yen is weaker. >> i bet if you wanted to do that just on the nikkei, if you were an external investor so you have to do it through the currency. >> right. you could have just put it on a nikkei etf in your own local currency. >> now with the etf products, ross, that is so much easier to do. is that really a buy and hold? >> basically, i think the nikkei was up 17% in the fourth quarter alone. that loan again was made this year. >> they're on a leverage. keeping it easy that way.
third point, by the way. >> 30%, 40% gain. >> and if you were on a hold -- >> and shot up for the year. >> yeah. daniel lowe made quite a pretty penny on greene greek sovereign bonds. so he's made a couple of big global macro calls that have turned out quite well. >> what will 2013 bring for investment and this time in china? after the break, we'll right and rumored wrongs against its growth prospect. to grow, we have to boost our social media visibility. more "likes." more tweets. so, beginning today, my son brock and his whole team will be our new senior social media strategists. any questions? since we make radiator valves wouldn't it be better if we just let fedex help us to expand to new markets? hmm gotta admit that's better than a few "likes." i don't have the door code. who's that? he won a contest online to be ceo for the day.
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plenty of developed countries are trying to rebalance their economies to become more export led. china is trying to spur domestic demand. i recently spoke with chinese financial markets expert michael pettit from peking university. we discussed beijing's challenge to move away from investment-led growth. we started off by talking about some of the most common misconceptions about investing in china right now. >> i think there's been a huge on change of opinion and people are recognizing that china's growth to date has been on an unsustained model and debt levels are growing very, very quickly. now there's more and more focus on debt, which i think is
correct. the interesting thing for me st what kind of growth rates we get this year. so in the first half of the year, i think growth rates are going to be quite high because debt is growing very quickly. >> so you've been cautious on china for some time. we are seeing better growth rates, the stock markets have held up recently well. are you suggesting that this isn't legitimate growth? >> yeah. we know why china has been growing in the second half of the career. we're pretty sure we know why it's going to be growth in the first half of this year. that's because credit expansion has been cart mat ig. in the first half of the year, they slowed credit growth. gdp growth slowed sharply. so sharply that i think there was a little of 9/11usness and they stepped on the accelerator again. and they've stepped on the accelerator, but they have to take their foot off. >> and these growth rates have to come come down. it's a more sxloebl concept. but even within china, there's a
more sustainable consumer led economy. is china sg going to manage this transition or do you see signs now that they're perhaps not handling it so effectively? >> well, the good news is that it's pretty clear that beijing understands the problems. and the new leadership is very concerned about the rise in debt, very concerned about rebalancing the economy and they're going to take steps to do so. many country ves tried this before and very few have been successful. it's a very difficult process. >> what are some of the companies that have succeeded on this front? >> very few. among the developed countries that became developed countries in the last hundred years, and when i say countries, i also include taiwan, korea and maybe chile. most of the other countries that have had investment-led growth have stumbled. it's very hard to take that next step. >> and china has its five-year plan, but what do you see over
the country if they don't start to put in place some of the protections for the social productions and the human rights productions. all these things, the legal system opening up to world markets, all these things people say need to happen to avoid that outcome? >> the political side is complex and it's not something that i have a huge amount of expertise on. but in terms of economics, it's pretty straightforward. the reason why consumg is so slow is because the household share of gdp is so low. and the only way you can do that correctly is through direct transfers from the state sector to the household sector. those things are easy to say, but politically challenging to do and that's the real challenge for china is that transfer. >> we're seeing more people warning about how the population is going to start slippinging. overnight, would your view on china change if they loosened up, for example, on the one child policy? >> that won't help.
the problem with loosening up on the one child only policy is it solves a problem 20 or 30 years from now. but until then, you can't change the policy. >> when in your view does china become investable? >> it's a question of what's valued and what's not well value. as china rebalances, we're going to see a much slower reduction in the growth of consumption, a much more rapid reduction in the investment sector. so stocks that benefit from growth consumption will be fine. stocks that benefit from high commodity prices or a significant capital investment are going to do very poorly. >> great interview.
great interviewer. >> that interviewer needs to slow down the questions. >> i enjoyed it. it was a great dress, too. india's key inflation rate is lower than forecast. analysts polled by reuters were looking for a rise of 7%. the government official said inflation is on track to hit 6.5% by tend of march. that would give india's central bank more room to cut rates to support growth if necessary. let's give you a look at what's on the agenda in asia for tomorrow. markets will be shut for lunar holidays but we are expecting foreign investment in january. bullup long is set to post its results. all eyes will be probably on news to suggest any one
specifically. money can't buy love, it says here, but it can buy you some street cred. in japan, men can have cards, chocolates and flowers delivered to them from a fictional female admirer. around the globe, the anti-valentine's day movement is growing. anti-love isn't anti-big bucks. >> red rose easy, chocolate covered hearts and candlelit dinners. true love doesn't come cheap, especially on valentine's day. according to one estimate, consumers spent more than $18 billion back in 2011 is. but as some retailers are finding out, the love struck aren't the only ones willing to put their money where their mouths are. according to one baker, the love loren are increasingly willing
to pay out big bucks to celebrate in their own way, as well. >> one friend of mine said, let's just do it. it was just girlfriends getting together. this year, i've seen a slight increase. they're still the normal orders. people are still doing the valentine's day order, but we've seen a slight increase in anti-valentine's day trend. >> but the broken harder have other news to soak their heart in. take, for example, the anti-valentine's day cake. they're promising no love songs and a lot of piniattas to take out your anger on those 200 plus people wanting to paint the town red. >> we had corkboards being put up. you can put your ex-girlfriends or boyfriend's picture. draw something funny on the face and just do a little bit and throw darts at it.
>> while the anti-valentine's day trend may be ka thattic for some, it hasn't led to a significant increase in sales. but could it some day be big enough to boost businesses' bottom line? >> i don't think so. i think it's a face that everything is going through. but eventually, everybody still loves valentine's day. >> love it or hate it, i don't believe valentine's day is going anywhere anytime soon. >> right. i would not know, no. earlier, we asked which corporate marriages do you think are meant to last and which tie-ups are meant to head to the altar soon. just tweeted to say merge progressive insurance and abercrombie and fitch. so agent flo can finally wear cool clothes, no lame uniforms. >> i love the progressive
france come in lower than expectations. japan's recession drags on as gdp shrinks for the third straight quarter. the economy is bottoming out. >> nestle shares fall after the swiss food giant warns this year will be ago challenging as 2012. the ceo tells cnbc europe remains a drag. >> it's going to take time. it's going the take years. it's going to take longer. >> and a mega merger is set to take off as the boards of amr and us airways sign off on their deal to create the world's biggest airline. >> all right. we have the composite eu gdp
number, down 0.6% quarter on quarter. that's what we're looking for and this comes after a weaker than expected german number today, as well. to the extent we talked, italy contracted 0.9%, worse than expected. and revisions to france suggested that they already had a recession in the first and second quarter of 2012, as well. ur low/dollar, just hitting the lows of the session at 133.40. kelly. >> ross, let's slip through the u.s. markets. we are looking for the dow to shed about 20 points from the open. the nasdaq, dow and s&p headed lower. yesterday, we did see a lot of the european indexes hitting intraday highs. china, taiwan, vietnam still
closed to celebrate the lunar new year. the nikkei has been the big mover overnight. the ftse 100 after hit ago five-year high yesterday, weaker towards the close today. gig up about a rt yeaher of 1%. interestingly, we're seeing weaker sterling and higher bond yields in the uk. not necessarily the best sign of internal dynamics for britain. germany gdp figures are down. the cac 40 down only about 0.1% today after a lot of analysts are warning this is the one why we could see more weakness ahead. the ibex 35 down about 1%.
it is also the third quarterly contraction in a row. probably leaves the contraction for around minus 0.5%. now, as far as yields are concerned, german bund yields are doing a little bit better on that, 11.5%. spanish yields are down on the session, 5.21%. uk lsh gilt i'm afraid having a bruising week, just under 2.2%, hammered yesterday by the inflation record as was the pound, as well. around is 55 against the greenback, u.s. dollar around 1.555. maybe we switch that on. now the low, 1.55.54. the yen is still kind of where we were at this time yesterday. 94.49 is roughly that may 2010 high.
euro/dollar, weakening down to the lows of the session, 1343.39. let's check in now on where we finish with the asian session. sixuan joins us from singapore with a recap. >> thank you, ross. a positive session for asian bourses on this valentine's day. the nikkei 225 rebounded 0.5% thanks to positive earnings from companies. uden surged today after the electronicsmaker raised its outlook. some caution ahead of the meeting this weekend. hong kong shares ended higher by about 0.8%. cnook shares added nearly 15%. south korea's kospi finished marginally higher, by about
0.2%. the bank of korea holds interest rates steady for the fourth straight month. this suggests the economy is showing further signs of strength and inflation remains in check. meanwhile, australian shares climbed to the highest level in about 4 1/2 years. resources stocks led the charge after china's civics buys a 13% stake in aluminum. rio tinto posted its first annual loss, but second half earnings still exceeded expectations. back to you, ross. >> okay. thanks very much, indeed, for that. the eu -- not eu. i keep saying eu. eurozone, sorry, my apologies, fourth quarter gdp number minus 0.6%, points to about an annual contraction of around 0.5% if my
numbers are right. portuguese annual quality around 1.8% quarter on quarter. 1.9% in the third quarter. the year on year, 3.8%. again, that is worse than expected. >> well, because, again, to annualize these figures, and this is what i'm used to looking.1.8% on the quarter points to something like 6.7% annualized pace. it's a really deep decline. >> meanwhile, did we mention this? greece's economy, unemployment rate sitting 27% as of november. so with those numbers, let's get out to jens nordic. we are just seeing euro/dollar to 1.3340. we hit a little weaker than this, 1.3 25, somewhere around
there. where -- and dollar index is at a one-month high. do these gdp numbers matter for the future direction of the euro? because a lot of people are pointed to do pmi and the ifo signaling the worst is behind us. >> i think they actually do matter. i think we're in a regime shift here where after a period where the risk premium was all that mattered to the euro, we're shifting to the growth indicators becoming much more important and the gdp figures obviously show that the recession is very much in place still on a broad basis in the eurozone. and the short-term data has been a little bit better, but a little bit better is pointing to around zero, raps. it's not exactly strong growth. so i think in 2013, we're looking at still very, very weak growth and i think that will gradually feed into the euro. we're going to have a different type of euro weakness than we've
seen in the last couple of years where it's been gradually growth driven rather than the panic spikes coming from the risk. >> and are we going to see a shift generally for currency markets? if growth going to be the driver for rather than yield or risk? >> i think so. i think we've been through a multi year period where it was risk on, risk off. we have an extremely correlated move across markets. but now we're seeing a much more idiosyncratic moves. obviously, probably is really, really high there. >> and i don't expect this to happen in the next couple of months, but does that mean the dollar -- although the dollar index is up at a month high. does that mean the dollar will become a pro growth cyclical quality? >> that's the question i'm being asked all the time. so i think later in the year, we could see a pro growth move in
the dollar. i think personally it's a little too early for that. what we've seen in the data is that the payroll tax have came into people's paychecks again in january is having a big impact on consumer sentiment and it's going to have a big impact on retail spending in the coming months. and for that reason and given the fiscal issues we are still fating, i think the first half is going to be quite weak and, therefore, i think the dollar trade is probably for the second half. >> and we're seeing european market hold up reasonably well given how bad these growths figures are. is this ultimately because it's what you're talking about? >> yes. i think we've been used to all markets being risk premium and driven button. that's less the case now. you can see the peripheral markets are trading relatively resiliently and that's a big change in the correlation, too. over time, if we get a substantially weaker euro, that will help.
but around 1.33, it's not a level that's particularly -- yet. >> and, again, i have to ask this for kelly. sterling/dollar, trading at 1.55. we saw yesterday, sterling getting weaker and gilt yields heading higher. 10-year gilt yields up to 10.22%. what's your forecast now? >> well, so we have seen a couple weeks of rather extreme volatility in sterling. obviously, the policy uncertainty is very elevated. we're going to have a new central bank governor coming in and there's a huge amount of speculation, but whether change in framework will materialize as a function of thaterso a different one. so i personally think that we probably are getting a little bit ahead of ourselves and in terms of expecting carney to do
something extremely stimulative. i think the framework will remain broadly unchanged and i don't think he will have the same influence as we've seen in japan, for example. i think there's speculation that this shift in policy from the bank of england could be dramatic. but the one thing to keep in mind is that the inflation rate in the uk is already relatively high and, therefore, it is not really comparable to the situation in japan at all. >> okay. sorry. so kelly at 1.55, this is the real point. should kelly at 1.55 convert all her dollars into the pound now or will she get a better rate in a month's time? >> in terms of sterling, we could be weaker, but you could try earlier. do you think countries are floating currencies should let markets determine fx rates?
we've seen hollande basically trying to talk down the prospect of the euro. is there any chance of the euro becoming more politically driven? >> yes. obviously, this week has been a very interesting in terms of a lot of different comments from g-7 officials. and frankly speaking, those signals have been quite mixed. i think going into this weekend, i think there will be an effort from all the different g-7 partners to be much more consistent, really stick to the script and the script is one where there should be no direct interference in currency markets and i think there's a consensus that that should be the case. and i would think they're not going to avoid being too illegal. >> jens, appreciate your time.
the boards of amr and us airways have signed off on their deal to create the world's biggest airline with more than 900 planes and 3,200 daily flights. the company will keep the american airlines name and will be run by the us airways ceo. the deal has been in the world since august. we'll show you the share price of usa airways. phil lebeau has just landed in dallas and we'll get analysis from an avenuation expert about this tie-up the. >> yeah. who did he fly with? also still to come, find out what the ceo had to say about the strength of demand in emerging markets. ♪ [ male announcer ] how could switchgrass in argentina,
change engineering in dubai, aluminum production in south africa, and the aerospace industry in the u.s.? at t. rowe price, we understand the connections of a complex, global economy. it's just one reason over 75% of our mutual funds beat their 10-year lipper average. t. rowe price. invest with confidence. request a prospectus or summary prospectus with investment information, risks, fees and expenses to read and consider carefully before investing. we all work remotely so this is a big deal, our first full team gathering! i wanted to call on a few people. ashley, ashley marshall... here. since we're often all on the move, ashley suggested we use fedex office to hold packages for us. great job. [ applause ] thank you. and on a protocol note, i'd like to talk to tim hill about his tendency to use all caps in emails. [ shouting ] oh i'm sorry guys. ah sometimes the caps lock gets stuck on my keyboard. hey do you wanna get a drink later? [ male announcer ] hold packages at any fedex office location.
you are watching "worldwide exchange." these are your headlines. eurozone gdp shrinks by 079% in the forty quarter, the biggest quarterly decline since 2009. >> and gdp shrinks for the third straight quarter. and amr and us airways look set to sign off on their $11 billion deals to create the world's biggest airline.
nestle has warned that 2013 will be every bit at challenges as 2012. carolyn, is that the nestle headquarters in switzerland? hi, carolin. >> good morning to you, ross. a 5.the% for 2012. that was the slowest annual growth in three years and maybe this is something that inest havers will have to get used to. as you pointed out, the ceo said this morning that 2013 will be just as challenging as 2012. despite that, nestle is convinced it can deliver 5% growth. >> you have two dimension necessary ur. you have part of europe is really hard hit and it's going to take longer.
so confidence is relatively low. growth in europe is reflecting that with very, very low single digits growth. but we had growth in europe. we had growth in southern part of europe and that comes through innovation. so we don't sell gdps. we sell on the opportunities that we see, identify and organize around. north america, we see some colors coming back in the consumer confidence. so we are confident that that is going to drive some accelerated growth in the future. >> that was mr. bulcke, the ceo of nestle talking to me earlier. shares of nestle are trading lower this morning at the bottom of cmi. shares have seen a spectacular run over the last couple of months. what we're seeing today is certainly a little bit of profit taking given that investors are not too excited about the fourth quarter growth number at 5.4% and the margins. then again, profit and the top line growth was better than expected and an listeds also
like the strong cash flow generation. now, it's a great thing that we are here on valentine's day here in the day. because you know among much other things like coffee, tea, soups, nestle also makes chocolate and, yes, there you go, that was my first valentine's day present of the day. >> as valentine's day, you give normally kisses. i going to give you a very nice kiss that we have that is a very elegant way of nestle giving a gift to you. >> well, thank you very much. >> so there you go. i'm being spoiled. but i think i'm just going to give those chocolates away to my crewmen because they've been standing out in the cold all day. even though it's valentine's day, the waistline is quite important, too, isn't it? >> we're going to hand the chocolates back and insist on a real kiss. >> no, no real kiss.
just the chocolate kiss. >> very good. by the book. >> yeah. and today for those that have given up chocolate for valentine's day, it's something of a problem. >> yeah. >> it's just as well you haven't, carolin. thanks for that. and the good thing about being there, you're not too far away from the ski resorts. >> so you don't give up negative, though, for lent? >> everything in moderation, kelly. >> i've never been very good at that one. because at the end of lent, it's true, all i want is a massive amount of chocolate. >> exactly. >> everything in moderation including moderation is my motto. still to come on the show, yes, happy valentine's day. if you're feeling romantic after the break, we'll speak to a top new york florist and the ceo about the business of valentine's day. we'll be right back. what are you doing?
you ready? we wanna be our brother's keeper. what's number two we wanna do? bring it up to 90 decatherms. how bout ya, joe? let's go ahead and bring it online. attention on site, attention on site. now starting unit nine. some of the world's cleanest gas turbines are now powering some of america's biggest cities. siemens. answers. happy valentine's day. americans will spend $18.6 billion to express their love. men tend to spend more, $176, while females spend on average
$89. wow. big business. joining us know is the owner of rennie and reed forest. reed and angus, hello and welcome to you both. happy valentine's day, i should say. reed, how big a day is it for you and what are some of the more unusual requests you tend to get? >> it's a big day. whether it's the weather or whether it's clientele, we had an order yesterday for a 1,000 rose arrangement, which we'll be sending out first thing this morning. this is an individual we see a couple times throughout the last three years and it keeps us on our toes. >> i see you have the low ask lush. i thought that was something that happens at the end of valentine's day. apparently it's a mixed floral. it's popular. are guys any good at this, reed? how much are they spending on average this year compared to
five years ago? >> guys are good at it because their heart is in the rate place and then they leave it up to you. we have a great team who are able to interpret what it is that's going to work for each individual client. you know, in terms of what people are spending, we're fortunate. although the economy still continues to struggle a bit, we are in a luxury goods market where we're seeing people spending more year to year. we're going to be about 20% to 30% high frer last year, which we're very excited about. >> that is cool. angus, are you seeing similar numbers for chocolate and how important is valentine's day for you guys? >> it's a rel big event. we're double digits up on last year and it's still continuing today. we're trading strongly this morning. we had lost orders from online deliveries until about 6:00 p.m. last night. >> what's the most popular product? >> it's our head over heels box which you've got over there.
it's the heart box. that also does very well. but we are seeing a real trend and it's not just in valentine's day, our big events, people being more careful about what they're purchasing. >> how so? >> they're trying to match chocolates and -- with people's personalities. so being particularly successful with our category we call lovely little things which are quirkily and meant to charm. >> so if you get dark chocolate, what are you saying to someone? i don't know how that pays out. reed, how do you use valentine's day in terms of expanding or promoting your business for the year? clearly, you're getting more people in in one year than you can built on that. how do you build on that? >> you can and our business is largely based on word-of-mouth. we've been around for 40 years. valentine's day is an emotional
transition and it's an opportunity to really leave an impact on someone's impression of who we are and what it is that we're able to provide. so we just do what we do and we offered the best service and the best product, creatively speaking we have, you know, a wide range of whether it's our classic signature dozen red rose arrangement, although we're seeing more and more clients are looking to personalize it a bit more and come up with mixed flower types or even choose the flowers that's going to make their loved one the happiest. >> and putting lots of thought into it. >> and angus, you're hoping to come to -- you've got a chocolate bond. you're offering investors a chance to put money into the country and get a yield of chocolate. how does this work? >> it's valentine's day and, really, it's the ultimate
expression of love from our customer toes our brand. so we really like that, of course. we raised over 4 million pounds in chocolate bonds. the way it works is our customers invest either 2,000 or 4,000 pounds and we pay all the interest in chocolate. >> how much chocolate is that, then? over what period of time? >> if you take the 4,000 pound bond would be it's a box a month. >> for sthp. >> for as long as you leave the money with us. >> okay. >> and last month, we had the opportunity for investors to ask for the repayment for their bond and only 3% actually asked to have it repaid. >> what is the monetary value of the box every month? >> it's approximately 20 pounds. so it gives you a very healthy rate of return. >> we're working on that. >> that's 240 pounds a year on 4,000 -- >> okay. >> it's about 7%. >> and edible.
i'm not sure if it's as liquid tradeable product. >> and with a soft center. reed, we wish you a good day, we know it will be busy for you. i guess this is a day when these two guys have to -- >> i imagine there's a lot of presents. can you imagine cha you would the have to do with those. cnbc confirms amr approved a merger with us airways. we'll give you the details, coming up.
welcome back to "worldwide exchange." i'm kelly evans. >> and i'm ross westgate. >> a mega merger cleared for takeoff. amr and us airways sign off on their $11 billion to create the world's biggest airline. nestle see is its worst faurth quarter outlook since 2009. japan drags on. the boj stands pat saying the economy is bottoming out. >> and nestle shares are down. they warn this year will be as challenging as 2012.
the ceo tells cnbc europe remains a drag. >> europe is depressed. it's going to take time. you have to mention the european part of europe is hard hit. .it's going to take longer. u.s. futures appropriately enough are in the head on valentine's day and apparently that's a trend that more likely than not, markets are weaker on this trading day. the dow jones industrial average is looking to shed about 15 points to the open. perhaps keyed off the weaker than expected eurozone gdp figures. the nasdaq/s&p 500 looking for slight declines when the session begins trading in just a little while. overnight, the cnbc ftse 100 gives us a sense of what we're seeing. the china markets are closed for
the lunar new year holiday. european markets give you a sense of where the declines are happening. a lot of focus here on the weakness in sterling and in gilt lately raising some eyebrows. xetra dax, look at this, now down by 1.1%, just about a large move for this index. germany's gdp came in at miceus 0.6% in the fourth quarter. while there are signs of a slowdown, this has clearly gotten some people worried. this is a place where analysts are worried there could be more deepening of the recession. we'll keep an eye there. the ibex 35 down 1.6%. greek unemployment hitting 27%, shrinking by almost 2% on the quarter. back to you. >> yeah. so just to remind you, that 0.9% i said in the headlines, that's for the year.
the one you're focusing on for the quarter is 0.6% for the quarter. quarter on quarter is what we look at. european stocks are what we were just looking at, as well? this is what some of our guests have already told us. >> in terms of the several months ahead, our overall target for dollar/yen is 100. there are a few levels in and around 95 which managed levels to get through in the short-term. and there may well be opportunities to provide dollar/yen going forward, but ultimately, 100 is what we're looking at. >> would the foundation of 13% earnings growth, another 3% in dividend yield, that would take you to a 16% return. to the extent we see this momentum in earnings, i think one can easily see a 20% return in emerging market equities.
>> there's no one on this planet now who doesn't know that bonds are expensive and guaranteed a real loss long-term. so people look at the asset class and say least bad in class is equities. >> betting on yen weakness has been a big win for george soros. he made nearly $1 billion betting against the japanese currency since november. he's in pretty good company with others making money trading on the yen's decline. at the same time, the world's leading finance minister of the central banks has been sounding the alarm bells of the g-20 summit in moscow. steve is there and joins us now. one could argue, steve, that those policymakers caused the volatility in the recent days by sounding alarmed about this. >> yeah. i think you're spot on, ross. i think that is exactly what
we've done. it doesn't appear that the broader investment community is quite perturbed. we were here at one of the sharp her events for the main g-20 meeting. we're now at the ritz carlton having been at the marriott yesterday. here today, we have the institute of national finance which represents about 470 financial companies. they've sent a letter out to the russian finance minister pleading him to try and get some coordination on interest rate policy because it's not creating a good and stable business environment. they're pleading for clarity on regulation, as well. saying that different jurisdictions with different regulations in the uk, france, the united states is creating a
complexity, especially for investors. which means it's almost impossible to invest some in some of the jurisdictions. preferably in the imf is the fact that they want a form of coordinated focus on how the exit strategy from qe and low interest rates will take place. as you pointed out, surrounding stimulus let alone exit from stimulus. in terms of bringing this back to the broader environment, it's very important for russia to look like it's making headlines on all of these issues for you. now still to come on the program, we'll tell you why cisco sees a rocky road highwayed in europe. all stations come over to mission a for a final go.
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application network that reduces the time to deploy cloud applications from months to minutes. with fewer bottlenecks like this. finally. charles! client golf. aim for the lake. really? welcome back to the program. one issue we've been following is whether spain can usurp germany as the export powerhouse of europe. that's the interesting call from morgan stanley which says the recession stricken country is set to rival germany as europe's biggest export led economy within the next tief years. there's plenty more on our website, cnbc.com. ross. >> meanwhile, of course, we've been looking at the impact of those growth numbers on
euro/dollar. let's show you where we stand in this session today. eu euro/dollar, 1.3323. we're back down to the lowest we've seen in the last month or so. over 137 was treent high. we heard jens nordic say earlier these numbers do matter because we have a big boost to the euro as it goes boosted high after we saw things like ifo and the pmi in germany turning around. this month, in january and february from the weakness. but it is that weakness persists and it is weaker than expected, then growth is going to start playing a bigger role for currencies as opposed to where we've been with the highest core late risk on/risk off or yield plays, as well. so growth starting to come in as more of a factor for currency investors, kelly. >> ross, thanks very much for that. if you're just joining us on the headlines, eurozone gdp shrinks 6% in the first quarter, the
biggest quarterly drop since 2009. japan's recession persists as gdp shrinks for a tlird quarter. but the boj keeps rates on hold. and amr and us airways looks to be set for their deal that will create the world's biggest airlines. and some of the other stories we're following, cisco's second quarter profit up 44%. mid size to tech spending is rebounding. products orders were flat on the telecom and entertainment sectors and cisco continues to struggle with weakness in europe which accounts for the quarter revenue. the ceo is being cautious fort year and it is the parts of europe are still pretty aston h astonishi astonishing. you're steading improvement throughout the year. i'm assuming that that means that it's europe, we don't have any xharnlg disasters there and that government do not
misexecute too badly. i think we're all anticipating a few bumps. but that can cause our customers to pause for a while. but i think the trend is clearly up and to the right but at a much slower pace than all of us would like to see. >> company shares are down nearly 2% in after hours. recovering some ground in early frankfurt trade slightly this morning. as "squawk box" teams show this morning in london, he says the region is fairly mixed. >> if you look at northern parts of europe, maybe the uk, the europe europe and central part including germany, we're seeing some reasonable signs of perhaps more positive momentum. >> and apple is firing back at a lawsuit filed by david einhorn defending its proxy proposal. apple says it doesn't improperly bundle several positions together. appearing is attack iing the
company. einhorn is suing to stop a vote on a motion to get rid of apple's right to issue preferred stock without shareholder consent. the stock today in frankfurt, up a quarter of a percent. a judge has dispoliced a lawsuit related to facebook. the suit claims mark zuckerberg and others were selected on who received disclosures before the offering. the judge says those investors couldn't sue facebook holders because they weren't shareholders when the alleged incident took place. shares moving up about 0.2% the today. they are up since maybe six months before that ipo. "the wall street journal" says a lack of financing support from banks is making it harder for schultz to put together a group of investors to take a majority stake.
schultz owns around 20% of best buy and its stocks. >> a cautionary tale for dell, that's for sure. meanwhile, amr and usa usairway's merger is approved for takeoff. we'll have the latest on the potential biggest airlines, worldwide. >> stay tuned. to grow, we have to boost our social media visibility. more "likes." more tweets. so, beginning today, my son brock and his whole team will be our new senior social media strategists. any questions? since we make radiator valves wouldn't it be better if we just let fedex help us to expand to new markets? hmm gotta admit that's better than a few "likes." i don't have the door code. who's that? he won a contest online to be ceo for the day. how am i supposed to run a business here without an office?! [ male announcer ] fast, reliable deliveries worldwide. fedex.
economy. we'll hear from pepsico, directv, molson coors and agilent. >> for the moment, the dow is called down 48 points. currently down on the nasdaq by over 12 points and the s&p is just over five points down. >> cnbc has confirmed the boards of amr and us airways have approved their $11 billion merger, this following a similar deal for amr mergers. the deal would combine 932 planes and 3,700 daily flights. phil lebeau first brought us the news last night and joins us from dallas. phil, hope you got some sleep. what are the press pekts for this corporate tie-up? >> we're going to hear about this from bog of you.
the eeo of us airways and the ceo will main the joint announcement here in dallas and later on in the doug, doug parker will be to tempe, arizona, ask talk with the employees there. doug parker is going to be the ceo of the new american airlines. he'll effectively be running it day-to-day. tom borden will be taking the position of nonexecutive chairman at least through the middle of 2014. but essentially, this will be doug parker's airline to run. and the importance of this merger cannot be overstated. this will be the world's largest airline. when you look at combining us airways and american, not only do they compliment each other here in the united states, but the dominance that they're going to have when you combine american in latin america along with american to heath row with us airways to european cities like amsterdam and brussels,
these guys are combined to away global behemoth, if you will, when it comes to a lines. this is the latest wave in the consolidation. it's pretty much played out as much as possible. >> when you add in aig or ba as cochair, as well, how -- and we know that they would like to get much closer, as well, how powerful does that become? >> extremely powerful. really, ross, the only thing you're looking at in terms of weaknesses for the new american, even when you factor in the tie-up with ba, is to asia. they are not as strong as united, not as strong as delta northwest, and obviously the asian carriers. eventually doug parker will have to address that in some fashion. but there was clerl the best
combination. these are the last two big players to come together. add in ba and it's a very powerful airline. >> are you flying down american and flying back usair to do some comparative shopping? >> believe me, i've done enough flying on both of these airlines over the years that i don't need to do any more comparative shopping. and he why b i know you are, fill. thanks for joining us. phil will be on cnbc all day with the latest reports. and joining us now for more, steve, welcome. >> thank you. >> we've been talking about american versus usair. who needs to do what? from each other in addition to make this successful going forward? >> i think the leadership will have to come from the u.s. it is half the size of american. doug parker has done an extremely good job there over the last decade. he has driven consolidation in the industry.
taking american west into the u.s. now they want to take the railroad 08. >> why take the american name? >> i think there's a historic legacy and value too comes with the merp layer. it's one of the great airlines that has been around for more than 80 years. when you look at the airlines, the significance of the brand, they will be all important. >> you heard, phil, talking about with ba they have great american, they have great european routes. if they want to go international in asia, how do they tie up on that? >> well, they brought relationships with dell. actually, if you look at the strategy that has developed from american over the last few years, they've had 25% of their capacity on international. the american hasn't done well with that because their capacity is focused mainly in the caribbean and in south america.
the money market markets are europe and asia. >> does that mean that they're going to reduce capacity in the u.s. or potentially are we going to see higher fares as a result? >> it's always a risk of higher fares. there somebody rumors taking place. taxes tend to have structurally adjusted some of those realities. i would expect them to be really limited in their networks. >> and what's interesting is all the airline stocks are up over the last 12 months, some to varying degrees. usair up nearly 60%. earlier this week, we spoke to guests who said there is now a -- finally we have got away from airlines being a social business, either there was a social need tore them and an investor return on that. have we turned the quarter here with airlines? so much restructuring, they are now on a solid commercial
footing. >> our industry has a habit of going through cyclical boom and busts. and most people, when you want to make money in the industry is start with a billion and end up with a million. and i don't think that's necessarily going the thang. some airlineses are struggling. they're a knew yiert than than anyone else. but now i'm bringing the world's competition back to the place. >> thank you so much. >> talking of mergers, earlier we asked which corporate merge marriages on this valentine's day you think are meant to last and which tie-ups should be headed to the altar soon. joe tweets in to say apple jcpenn jcpenneys. now we're showing earlier progressive and abercrombie should tie up so flo can wear
the -- can get rid of the lame uniforms. you don't know who floe is? no, you don't. for american viewers, you'll get "squawk box" in a few moments. elsewhere around the yoeb, we will continue. [♪...] >> i've been training all year for the big race in chicago, but i can only afford one trip. and i just found out my best friend is getting married in l.a. there's no way i'm missing that. then i heard about hotwire and i realized i could actually afford both trips. see, when really nice hotels have unsold rooms, they use hotwire to fill them. so i got my four-star hotels for half-price! >> men: ♪ h-o-t-w-i-r-e ♪ hotwire.com >> announcer: big on car rentals too, from $12.95 a day.